Buy ICICI Prudential Life Insurance Company Ltd For Target Rs.836 - Yes Securities
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Diversification in product as well as channel mix
* While IPRU has had to turn cautious with regard to retail protection in recent times, IPRU remains the best play on the retail protection opportunity: Slowdown in retail protection has resulted due to a variety of temporary reasons such as (1) Feedback from reinsurers (2) Pandemic environment and (3) Reluctance for medical testing. However, IPRU’s superior protection opportunity size is derived from its large wealth customer base since wealth customers are more receptive to protection products, as opposed to mass market customers. ICICI Group is the 2nd largest wealth manager in India with a wealth AUM in excess of USD 30bn.
* In the overall protection basket, Group Term Life and Credit Protect have picked up the slack from Retail Protection: In 4QFY21, IPRU had said Group Term Life would also be key area for the company even though rival HDFC Life said it was wary of doing this business. IPRU’s confidence with GTI stems from its customers being stickier.
* IPRU has become more open to selling Non-Par Guaranteed business while not compromising on risk management: In 3QFY21, management heralded a departure from past approach and said is was more willing to carry out deferred Guaranteed business. Non-Par Guaranteed business still contributes only 1.4% to liabilities, as of 2QFY22.
* Annuities have also emerged as a new area of growth for IPRU: The share of annuity products in new business received premium has risen to 20.1% in 1HFY22 compared with 15.2% in 1HFY21 due to a 95% YoY rise. IPRU has become one of the largest pension and annuity providers with pension fund AUM having risen 74% YoY to Rs 97.5bn. The market share for IPRU in private sector pension fund AUM stands at 15.7%.
* In terms of channel mix, IPRU is working hard to become more diversified and reduce its dependence on ICICI Bank: Non-ICICI Bank bank partners now contribute >15% to total APE compared with <10% more than a year ago. Furthermore, IPRU is also investing in other Non-ICICI Bank channels, having added ~20,000 agents during FY21.
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